Karmazin Says Sirius/XM Would Cap Price

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Sirius Satellite Radio CEO Mel Karmazin says that if XM and Sirius are allowed to merge, the combined company is willing to cap prices--he says he even expects to lower them--and accept other conditions from the Justice Department, Federal Trade Commission, and the FCC in order to get the deal done.

He also pledged that nobody would have to buy a new radio to get service from the combined companies.

Karmazin said the deal does not have to be done-- neither company is claiming hardship--but that if it is approved, it will bring lower prices and more choice. He called it  "pro-consumer."

These statements were made at the first meeting of a House Judiciary Committee antitrust task force headed by Committee Chairman John Conyers (D-Mich.).

The hearing made for some interesting alliances. Public Knowledge, which advocates for fair use recording rights, said it would support the merger--so long as it passed antitrust muster--but they had a few conditions. They wanted a  three-year price cap, a 5% set-aside of channels for educational and informational programming, and a la carte programming.

Karmazin would not agree to a time period for price caps, and said that a la carte was not technically feasible, though he said that offering bundled tiers of service for less than the $12.95 monthly price were a possibility..

Against the merger were the National Association of Broadcasters and the Consumers Union, both of which which have opposed broadcasters on the issue of media ownership rules.

NAB President David Rehr said that monopolists would promise anything to get their monopoly--Karmazin took some exception to the characterization. Rehr argued that the two companies were a duopoly wanting to become a monopoly, that it would use that power to cross-subsidize competition with local over-the-air radio, and that the FCC knew what it was doing when it authorized satellite service in 1997 with the caveat that the two companies getting the licenses could not merge.

Karmazin countered that the prohibition was instituted at a time when there were far fewer choices in the audio space.

The NAB took some heat for arguing against concentration in the market given its backing for broadcast media mergers, with a couple of legislators saying NAB's charaterization of Sirius/XM reminded them of Clear Channel.

Arguably the toughest on Rehr was New York Democrat Anthony Weiner, trying to make the case that satellite radio was not a monopoly since it had to compete with terrestrial radio.

"Do your stations air music?," he asked Rehr. "Yes," he said, but was cut off before he could continue. The question was repeated to Karmazin, who said yes. "Talk?," asked Weiner, and the sequence was repeated.

But Mark Cooper of Consumer's Union came to Rehr's defense, arguing that Satellite radio could compete with local radio, but that local radio could not compete with satellite nationally. He said Siruis and XM could aggregate audience and afford--though Karmazin says his company has lost $3.8 billion--to offer services that local radio could not because the audience was too small.



At the end of the hearing, Conyers went out of his way to thank Karmazin for his appearance and cooperation with the committee. Karmazin heard some more encouraging words. Maxine Waters (D-Calif.) said she was not against the merger, though she wanted reassurances it would not have an adverse imact on diversity. Karmazin said he had an excellent record on diversity. When Waters pointed out that he had been chairman of Viacom and that the first thing the company had done after it bought BET was cut news, Karmazin said that was not true, that neither he nor Viacom Chairman Sumner Redstone had asked news to be cut, and that in fact he had a record of increasing news.Virginia Democrat Rick Boucher said he thought that with the proper conditions, and if it passed muster with Justice  on antitrust grounds, the merger sounded like it was in the public interest and should be approved.

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